How Are You Going To Get Paid?

Getting paid used to be pretty simple. You'd send your client an invoice, and they'd eventually send you back a cheque (sorry...check). Once in a while they'd forget, so you wouldn't get paid for months. Other times the cheque would bounce. Look, I didn't say it was better...just simple.

So you want to start an online business? How are you going to get paid? Let's go through some of the options available to you.

The Worst: Cash or cheque

Not that long ago these were the only two options available. Now they're usually the least desirable.

Pros: No merchant fees for either, and cash is immediately available.
Cons: No paper trail with cash. Cheques can bounce and most banks will hold the funds for a few days until the cheque clears.
Summary: Cheques are a pain in the butt. If it's a remote client you have to wait for snail mail. Then you have to wait while the bank places a hold on the funds. At least where I'm at it's usually a 2 week delay from "the cheque's in the mail" until I can use the funds. Cash is great. Who doesn't love cash? But unless you're breaking bad, no self-respecting business owner uses cash as their primary payment method. You look super-sketchy when you only accept cash. Plus, imagine if a delinquent client claims to have paid you in cash. Good luck proving them wrong.

Middle of the Road: Merchant accounts

This can range from a PayPal account to a merchant account issued by your bank.

Once you start taking payments from people online, it really helps to have a method that doesn't require a face-to-face transaction or the post office.
Pros: Easy for clients (remote and local) to pay you. Wide range of types of accounts to choose from. Faster than snail mail.
Cons: Merchant fees. Most transactions will incur a fee. There's a big range, depending on the type of account, but the standard rate will usually fall between 2-3%.
Summary: People getting started with an online business often begin by setting up a PayPal account. It's easy to setup, doesn't require good credit, and lets your clients pay you by credit card, their PayPal balance, or even an electronic cheque. However, fees are usually 2.75% plus $0.30 per transaction. You can then spend the money directly from the PayPal account, withdraw the money to your bank account, or in some countries (not mine) you can use a PayPal debit card. I've personally never had any problems with PayPal (other than hating the fees), but I've heard a lot of horror stories about frozen funds. If you want an alternative, there are plenty of other options. Stripe and Square are two of the big names. They both have similar rates so you're not saving any money at this point. I know Square offers a free device that connects to your phone that lets you swipe cards. This is great for taking payments in person. The (potentially) big jump comes when you get a merchant account at your bank. In Canada you'll be dealing with companies like Moneris or Chase Paymentech. I'm not sure the big names elsewhere. Getting these accounts requires more paperwork and a credit check.
There are benefits to getting the extra scrutiny. If you are taking a lot of in-person payments each month you could be getting much better rates. When I ran a small retail shop we were getting 1.75% on all credit cards. If you're doing $10,000/month on credit cards that's an extra $1,200 in your pocket each year. I'm not sure the rates you'd get for over the phone or online payments but they're usually going to be less than PayPal's. Unfortunately companies like Moneris are very private about their rates until you're actually signed up. You can also accept debit cards, which is the main form of in-person payment in Canada. Finally, the turn around time for deposits is much quicker. If the merchant account is tied to your business bank account you will often received the funds the next day. In my experience, cash flow will make or break your new business. Having the money a day or two sooner makes a big difference. If you don't believe me, ask your employees if they mind getting paid on Monday next time.

The best: Direct deposit

This includes ACH, wires, email money transfers, etc.

Pros: No fees (usually...see the summary). Faster than snail mail, and often faster than merchant accounts too.
Cons: You have to exchange sensitive info with your client. They have more work on their end getting you paid.
Summary: Direct payments represent the best of both worlds. You're getting paid quickly but usually not paying any fees. Domestic wires and email transfers can actually show up the same day; ACH payments only take about 2 business days. International wires are quite fast too. I have US clients, and wires usually show up in 1-2 business days. The real trouble is actually on your client's side, which might deter them from wanting to pay you this way. I mean, it's not a lot of work, but enough that if they aren't already paying their contractors this way, they might resist. It's also pricey for them if you need a wire. Domestic wires are about $30, and international ones are about $40. In some cases they split the cost with the contractor. So, if you are an international contractor, and your client asks you to cover $20 of the wire fees, it's worth comparing the rates. Small invoices are better off being paid by PayPal, but once your invoice hits 4-digits it's cheaper to chip in for the wire.

Yes, I know there are other options.

There's also bitcoin. I know almost nothing about it so I'm in no position to give you any info on the subject. Thankfully, the folks at The Sleeter Group did a "Bitcoin for Small Business" video series about it.

I suppose you could also get paid with a money order or Western Union. Heck, you could barter or take gift cards too if you want. These are all possibilities, and the point is that you receive something of value for your services. If you are happy to reconcile a few bank statements in exchange for a tire rotation and a couple loaves of banana bread who am I to judge?

It's just important to be aware of your options, and make a plan before you get started.

7 Tips to Prevent Sync Issues in FreshBooks

The term synchronize seems too technical to inspire a lot of emotions. But tell someone that they just lost their data due to a "synchronization error" and all sorts of emotions begin to emerge.

Sync (or is it synch?) has been one of those features that you love and hate. Everyone wants their app to sync with something else. All the software developers make sure to highlight sync on their features page. Yet it's also the one feature that seems to be the most prone to catastrophic problems. Who reading this hasn't had a phone suddenly end up with 3 copies of everyone's contact because of a sync issue?

Yet despite all of the problems we have with sync, I have to rely on sync daily to keep something as important as my client's bookkeeping data up to date.

FreshBooks is a great app for time tracking and invoicing, but it doesn't handle all bookkeeping tasks. That means I need to get that data into another app. The way bookkeeping data is synched with FreshBooks is entirely one-time, one-way.

I create an invoice in FreshBooks. As soon as it is sent, it gets synced into the receiving app, like Xero or Kashoo. That's where the synching stops. If I make changes to that invoice in Xero, those changes don't go back to FreshBooks. Conversely, if I make changes to the invoice in FreshBooks the changes don't get sent to Xero. Payments will sync across later on, but that's it.

Why is this important?

There's usually a reason we're using 2 apps. In my case, it's usually a situation where the client is using FreshBooks day to day, and I'm using Xero or Kashoo. If either of us makes changes to an invoice, the other side doesn't see the updates in the reports. This means there will be discrepancies between both sets of books. If it was always the case that Xero was right and FreshBooks was wrong then I could just send the client some reports each month. But that's not the case. More often than not it's my data that's wrong.

So, bookkeepers, what are we to do? Here are 4 steps to make sure your data stays in sync.

  1. Be aware of the fact that this is an issue. Just being aware that this is an issue will help you prepare.
  2. Make sure your client is aware. Let them know that changes they make to FreshBooks invoices after they're sent don't update the data in Xero or Kashoo. This might make them less likely to make late changes, or at least let you know when they do.
  3. Make a checklist of areas you'll want to review each month before generating final reports.
  4. Create revenue and receivables reports in each app. Once the numbers in both apps match then you're good to go.

Just because 2 checklists are better than 1, let me run you through the 3 most common situations that would cause the data to get out of sync.

  1. Invoice totals are adjusted after they are sent. This usually happens on the client side. Maybe someone submits their time late and has to add it to the invoice later. Sometimes the customer pushes back about certain line items and adjustments need to be made.
  2. Invoices are written off or deleted. I don't mean bad debt writeoffs down the road. This just means that, after it was sent to the customer, the invoice was fully discounted or removed.
  3. Payments are changed or removed. All payments will sync across properly, but sometimes a payment is reversed, removed, or applied to a different invoice.

Until we get better sync this is just going to be something we have to deal with. If you put together a detailed plan, and follow it each month you should be fine.

Let me know if you've had this problem before: either in the comments or by replying to this email.

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Making the Move to Harvest


After I just talked about making a big move last month, it looks like I'm doing it again.

Last month I talked about a client who I was moving from QuickBooks desktop to QuickBooks Online. I'll be writing more about that in the future, but now I'm facing another move.

One of my clients is moving from FreshBooks to Harvest. I very briefly tested it out a year or so ago, but otherwise I have no experience with it. It's focus is similar to that of FreshBooks. They specialize in time tracking and invoicing. So, the question is; why are they making the switch?

The move has nothing to do with the bookkeeping side of things. This is a very project-focussed business, and apparently Harvest has better project management than FreshBooks.

My initial reaction was to throw a tantrum like a 4 year old. Apparently I'm getting into the grumpy old man stage of life. I've spent a long time tweaking the system to work just the way I need it to, so I wasn't looking forward to a change.

But here we are.

I did a bit of research into Harvest. There are a couple things I don't like about it, but at the end of the day the benefits for the team far outweighed any minor complaints I had.

< rant >Fellow bookkeepers, let me talk to you for one quick second. It doesn't have an AR Aging Report. A friggin' AR Aging Report! How do you build an invoicing system and not include a way to display a simple report of what clients owe you money...broken down by age? It just doesn't make any sense. < /rant >

Ok, deep breath...

So, in the next few months I'll be reporting back with my impressions. My initial thought is that it's going to be different. Not better or worse, just different.

If any of you have used Harvest before, please let me know your thoughts. If you have been wanting to check it out, feel free to ask me questions. I'm happy to guinea pig this for you, so just leave a comment with "Hey, does it do __?" and I'll find out.

Wish me luck.

One on One: Xero


*One on One is a series of reviews. Instead of a long-winded breakdown, I give you a quick summary along with one positive and one negative. *

So far my One on One reviews have covered 2 of the 5 main bookkeeping apps I use. Today we're going to do a quick review of Xero.

If you follow this industry at all you've heard about Xero. I don't think it's any secret Xero has their sights set on being the company who overtakes Intuit. I mentioned in a previous post that Intuit just announced that QuickBooks Online just surpassed 1,000,000 users. Xero has the silver medal with over 500,000 users. It's no surprise. They have created a very powerful service that offers a lot of power with a large directory of compatible 3rd party add-ons.

Name: Xero

Description: Xero is a full featured bookkeeping service based out of New Zealand. Founded in 2006, it has grown to become the second largest cloud-based accounting software. From the software I've used in my business it comes the closest to replicating the features and power that Intuit has in its offerings. Payroll is still quite basic and not available everywhere. It also doesn't do time tracking so I usually use it with FreshBooks. However, Xero does connect with a wide range of 3rd party offerings to fill in the gaps where it lacks features. You can connect your bank accounts, send out and receive payments on invoices, and track everything your accountant would need from you. The only major feature it's still lacking is inventory, so this is still not suited for any businesses that need inventory management.

Cost: There are 3 price tiers, from $20-40/month. The first tier is quite limited (send 5 invoices per month) and the top tier only adds multi-currency support. Most people will be using the $30/month plan.

One Positive: Bank rules, hands down. Some software will do a fairly good job of learning how to categorize your downloaded bank transactions. This lets you get through bank reconciliations a bit quicker than a fully manual process. Xero takes this 3 steps further with bank rules. You can create simple or complex rules to automatically handle the transactions as they come into Xero. For example:

If the vendor = Staples, then mark this as Office Supplies. That's a really simple example. Take a look at the screenshot below to give you an idea of what you can do. Combine this with Cash Coding, which lets you accept multiple transactions at once, and you can really fly through those bank recs each month.

Xero Bank Rules

One Negative: Reporting. I just can't find a lot of good to say about most of these bookkeeping services when it comes to reporting. Why is this so tricky? The list of reports is a bit bigger than others, but you can't do much in the way of customizing them. I don't have a problem spending the time to create a custom report of my own, but I'm not given the tools I need to make this happen. Xero is tracking the data, so there's a database that contains all the data points I need. Why not give us the ability to dig into our data and report it the way we want?

Final Thoughts: Xero is pretty darn good as an all-around bookkeeping solution. Other services do certain things better. FreshBooks does invoicing better. ADP is much better for payroll. But if you need something to handle your entire business and your business is a bit more complex than what Wave can handle, Xero is a great solution.